Getting physical in 2015

03 February 2015 |

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The telecoms market ended 2014 with a bang. First, BT blindsided market experts by opting for EE rather than O2. The £12.5 billion deal with EE’s two owners Deutsche Telekom and Orange was one of the largest telecoms deals announced in 2014. Not to be outdone, Telstra then sneaked through a late $679 million bid for Pacnet, set to be its largest acquisition to date.

The telecoms market ended 2014 with a bang. First, BT blindsided market experts by opting for EE rather than O2. The £12.5 billion deal with EE’s two owners Deutsche Telekom and Orange was one of the largest telecoms deals announced in 2014. Not to be outdone, Telstra then sneaked through a late $679 million bid for Pacnet, set to be its largest acquisition to date.

Although a considerably smaller deal, it could prove to be one of this year’s most intriguing wholesale stories. It was no secret that Pacnet had been on the look-out for a buyer for some time. The operator had developed Asia’s largest privately-owned subsea cable network, but struggled to ever fully monetise it.


In 2012, PT Telekomunikasi Indonesia pulled out of a $1 billion deal for the company, confirming what the industry already knew: physical network assets alone are an unattractive proposition to investors. 

Pacnet changed tack, employing CEO Carl Grivner to spearhead a push into new service areas, most notably in the data centre market. The company then spent much of 2014 adding sophistication to its scale, deploying an SDN platform and NFV features to its extensive network

In spite of such ambitious attempts to modernise its infrastructure and service offering, Pacnet’s value appears to have dropped by over $300 million in the two years since the failed takeover. Telstra is a carrier that has moved comfortably with the times, and believes the scale of Pacnet’s network can help support the growth of its value-added services across Asia.

Capacity will be watching closely to see if it can monetise such vast infrastructure. Because if it can’t, the value of large physical network assets looks set to plummet even further.